Study on benefits, costs helped India govt firm up RCEP stand {India didn't join China's trade group}

Indian Express ^ | 17 November 2020 | Anil Sasi , Prabha Raghavan

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An internal assessment of India’s bilateral free trade agreements with nine countries, including five signatories of the Regional Comprehensive Economic Partnership (RCEP), played a pivotal role in the government firming its position against joining the mega trade pact. The assessment showed a “moderate utilisation rate” of Free Trade Agreements (FTAs) over a five-year period, and a trade deficit for India in most cases, save in regard to SAARC nations, The Indian Express has learnt.

While the remaining RCEP members went ahead and inked a deal on Sunday — a little over a year after Prime Minister Narendra Modi announced India was walking out of negotiations citing “significant outstanding issues” — the bloc has made it clear that the door for India to return to the negotiating table will remain open.

However, India’s escalating political tensions with China over the last year are seen as having pushed up the entry barrier for the government. Also, given that India already has bilateral pacts with a number of RCEP members including the ASEAN bloc, South Korea, and Malaysia — and is negotiating agreements with some of the remaining RCEP members such as Thailand, Australia and New Zealand — the cost of opting out of the deal is being seen as not outweighing the benefits of keeping China’s looming presence at bay.

Officials also pointed to work that is underway to activate the trilateral Supply Chain Resilience Initiative (SCRI) with Japan and Australia that aims to increase collaboration and cut the dependency on Chinese inputs. Also, there is a growing view that it would serve India’s interest to invest strongly in negotiating bilateral agreements with the United States and the European Union, both of which are currently work-in-progress.

The government’s assessment of various bilateral trade agreements has revealed that the growth in trade (CAGR) with partners over the last five financial years was a modest 7.1 per cent. While “there has been growth rate in both imports from and exports to these FTA partners”, the “utilisation rate” of FTAs both for India and its partners has been “moderate” across sectors, according to this study, which covers pacts signed with Sri Lanka, Afghanistan, Thailand, Singapore, Japan, Bhutan, Nepal, Republic of Korea and Malaysia.

“The reasons for which India walked out of RCEP last year have not changed. They haven’t improved and, in fact, have gotten worse, because there was earlier only an economic threat from China. Now, it exists on the political front as well,” Prof Dhar told The Indian Express

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note - Australia, New Zealand and Japan did join

India made a decision not to join it as it was not providing enough benefits to India